During or after a construction project, it can become apparent that there is a defect in the works. In circumstances where the cause or impact of the defect is unclear, it may be necessary to engage an expert to investigate.

In this article, we discuss the importance of dealing with defects soon after they are discovered, when to engage an expert, and how to maintain privilege over your communications with your chosen expert.

Why should you engage with a potential defect early?

It seems like common sense, but the sooner a defect is identified, the sooner and likely cheaper it can be fixed. Defects left unattended can cause significant damage. Depending on the defect, if left alone, it can increase the eventual rectification costs and/or significantly reduce the value of the property. Further, if you have a right to claim on your insurance, confronting the defect early can help ensure the success of your claim.

Besides insurance claim issues, commencing investigations early will also help ensure that you don’t risk losing your right to seek compensation if the defect amounts to or was caused by a breach of contract or someone’s negligence. In Queensland, a cause of action for breach of contract or for negligence must be commenced within six years of the cause of action accruing, according to the Limitation of Actions Act 1974 (Qld). This limitation period will be longer if the claims relate to personal injuries or death as a result of the defect.

A cause of action for a breach of contract accrues on the date of the breach, while a cause of action for negligence accrues on the date the loss is suffered. If the defect was latent for some time, the cause of action for negligence may accrue years after the construction work was completed. For further information about when a cause of action accrues, read our earlier article on hurdles to recovering loss for latent defects in construction projects.

All of Australia’s states and territories have similar limitation periods. However, in the building industry, there are additional limitations in most jurisdictions, these are referred to as ‘long stop’ limitation periods. A long stop limitation period essentially prevents proceedings from being commenced more than 10 years after the building works in question were completed or the date the occupancy certificate was granted (depending on the jurisdiction). This can reduce the time within which you must commence proceedings. For instance, if a defect has been latent and only manifests and causes you loss nine years after the building work was completed and/or the occupancy certificate was issued, you will only have one year to commence proceedings for a civil action for loss or damage arising out of or in connection with defective building work.

The long stop limitation periods are not found in the usual Limitations of Actions Acts in each state and territory. Instead, the long stop limitation periods sit within building-specific legislation.[1] In Queensland and Western Australia, there is no statutory long stop limitation period.

In summary, if the cause and extent of a defect is unclear and if it is not investigated early, there is a risk that you may not have sufficient information to commence your legal action within the limitation period. Matters to keep in mind are that you will have an obligation to identify every potential defendant under the Civil Liability Act 2003 (Qld) (as discussed in our previous article), and the expiry of the limitation period may prevent you from amending, or limit how you may amend, your legal case after you have finalised your investigations of the cause and extent of the defect.

Engaging your expert

Experts may be necessary to determine:

  1. the cause of the defect
  2. the extent and effect of the defect
  3. the method and cost to rectify the defect.

More than one expert may be required depending on the defect. For instance, one or more experts who specialise in the type of defect may be required, and another who can complete a quantum assessment of the cost to rectify the defect.

It is important to ensure that your experts are suitably qualified to provide an opinion about the defect. For example, if the defect is cracked concrete and there is a question about the concrete mix, you may be best placed to find a concrete scientist who understands the importance of heat and mix ratios. It may also be necessary to engage a structural engineer who can then apply the findings of the concrete scientist to the question of the structural integrity of the building or structure and the necessary rectification.

The expert engagement process can be lengthy if it is difficult to find the expertise necessary to investigate the defect. This may require searching further afield than Australia, which can bring its own difficulties with time zones.

Finally, if you intend to rely on your expert to support your legal case, it is worth investing early in an independent expert who will have more credibility than a consultant involved in the original construction work.

Maintaining privilege

It is often practical to instruct your solicitors to engage your expert on your behalf, be the conduit for any written communication between you and your expert, and conduct the matter in such a way that privilege will apply to the extent it lawfully can.

If the expert opinion is being sought to assist you settle a dispute, it and any communications relating to it may be subject to ‘without prejudice’ privilege, which exists to protect parties who are willing to negotiate. The principle effectively protects the documents that are brought into existence for settling a dispute and prevents them from being relied upon by the other party to your detriment. This is especially important if those documents appear to admit something you wouldn’t have admitted but for the potential of reaching a resolution. Therefore, all documents should be marked as ‘without prejudice’ where possible.

If you obtain an expert report for use in a settlement negotiation, it is generally considered to be ‘without prejudice’ and is not disclosable outside of that setting. However, to claim that a document should not be disclosed or cannot be provided outside of the settlement setting, you must be able to show that there was a proper connection between the expert report and it being produced for settlement.

If litigation is anticipated and you have instructed a solicitor to act on your behalf, communications with experts can be subject to legal professional privilege. This requires that the communication is confidential and has been made for the dominant purpose of being used in aid of, or obtaining legal advice about, actual or anticipated litigation. However, when an expert report is finalised and exchanged between the parties, any privileged documents relied upon by the expert in preparing the report are no longer privileged. This will generally include the instruction letter or brief sent by your solicitor to the expert.

However, documents that are created by experts throughout the course of preparing their final expert report can be deemed to be outside of this litigation privilege and potentially disclosable. Unlike other Australian jurisdictions, in Queensland, a document consisting of a statement or report of an expert is not privileged from disclosure. To minimise your disclosure obligations, you could:

  1. request the expert not to prepare any working documents, including draft reports
  2. if a draft report must be prepared, ensure that this is issued to your solicitor only and exclusively for a review to provide you advice.

Further, to help maintain privilege, it is strongly advisable that every piece of correspondence sent to the expert is labelled as confidential and privileged. If a document is not treated as confidential and privileged, privilege will likely be waived.

Conclusion

Confronting defects early is an important consideration for those in the construction industry. Where necessary, engaging the right expert is essential, as is ensuring your position is not compromised throughout the expert process.

In such circumstances, it is important to engage suitably experienced solicitors, such as our construction team, to assist in protecting your rights and privileged information throughout a generally contentious process.